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<br />Royal Gold has entered into an option agreement with <br />with Resource Exploration and Development Company (REDCO) <br />of Reno, Nevada to purchase a gold property near Prescott <br />in Yavapai County, Arizona. The option provides for <br />payment of $300,000 in various installments over two <br />years plus the retention of a 10 percent net profits <br />interest by REDCO. <br />REDCO has also entered into a management services <br />agreement with the Company to carry out certain <br />developmental activities in connection with the property. <br />REDCO is a well-known organization offering consulting, <br />evaluation, and development services to the minerals <br />industry. <br />The Arizona project is an advanced-stage gold <br />property. REDCO has estimated that there are more than <br />150,000 tons of drill-indicated gold ore reserves on the <br />property. The Company considers these reserves adequate <br />for a production level estimated at 10,000 ounces in the <br />first year. The property is fully permitted for heap <br />leaching. <br />Initial plans for the exploration and development of <br />the project involve drilling, trenching and sampling to <br />confirm the reserve base. Geologic projections indicate <br />the possibility of expanding the reserve base. Other <br />2 <br />